Which of the following statements regarding the NPV decision rule is false?
A) Reject projects with a NPV of zero, as accepting them is equivalent to reducing firm value.
B) When faced with a set of alternatives, choose the one with the highest NPV.
C) Accept those projects with a positive NPV, as accepting them is equivalent to receiving their NPV in cash today.
D) Reject those projects with a negative NPV..

Question

Quizplus · Accepted Answer

The statement "Reject projects with a NPV of zero, as accepting them is equivalent to reducing firm value" is false. Projects with a NPV of zero should be accepted as they are expected to generate exactly enough cash flows to recover the initial investment, and accepting them will not reduce firm value.

Which of the Following Statements Regarding the NPV Decision Rule